With investors increasingly relying on AI (artificial intelligence) for everything from portfolio management to mutual fund selection, financial advisors frequently get asked, \u201cWhy pay a financial advisor when AI can do it for free?\u201d<\/p>\n
But a quick test of these chatbots revealed a glaring problem, said Mrin Agarwal, financial educator and chief executive of Finsafe India Pvt. Ltd.<\/p>\n
AI frequently offers financial advice, such as arbitrary fund recommendations or short-term equity exposure, without assessing an investor’s goals or risk capacity. Whereas Agarwal said, a financial advisor would typically begin with an assessment of goals and risk.<\/p>\n
The core problem, Agarwal said, is that investors do not stop to check whether AI-generated<\/a> advice is actually relevant to their financial situation.<\/p>\n Also Read<\/strong> | Why staying invested is simple advice that’s hard to follow<\/a><\/p>\n Instead, they are easily swayed to take unintended risks because of AI’s warm, confident language, which can lull investors into a false sense of security, and investors only realise when it’s too late to reverse.<\/p>\n The financial educator cautioned that while technology may make financial information more accessible, it can also unintentionally steer investors towards risks they may not want to take.<\/p>\n Why must personal finance remain human?<\/p>\n AI chatbots present information with such confidence that it is easy to overestimate their reliability. However, as seen during recent tax seasons, AI often miscalculates because it misses complex tax rules<\/a> or individual nuances.<\/p>\n In finance, sounding authoritative does not guarantee that the advice is correct or suitable.<\/p>\n \u201cPersonal finance is called \u2018personal\u2019 for a reason,\u201d Agarwal said, noting that while AI is great for general education, it fails to grasp the individual side of finances.<\/p>\n AI assumes humans behave rationally, but real financial lives are shaped by complex circumstances and emotions. But a financial advisor considers these nuances\u2014and often the emotions\u2014when giving advice, he said.<\/p>\n Also Read<\/strong> | How much monthly SIP does a 30-year old need to build a corpus of \u20b95 cr by 60?<\/a><\/p>\n Sharing life-stage realities, Agarwal said, a 65-year-old needs holistic estate planning, while a 35-year-old in debt needs behavioural coaching\u2014not just a mathematical repayment formula.<\/p>\n During volatile markets, investors often panic. Agarwal noted that an AI will simply echo the framing of your prompt, whereas a human advisor will play devil\u2019s advocate and challenge emotionally driven mistakes.<\/p>\n Accountability and privacy gaps<\/p>\n Replacing an advisor with an algorithm introduces two major structural risks:<\/p>\n\n